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Starbucks CEO: Affordable Care Act No Excuse to Cut Benefits

Jan Lee
Jan Lee | Wednesday August 28th, 2013 | 4 Comments

Starbucks_Affordable_Care_Act_logo_marcopakoThere have been plenty of stories recently about employers that have used the Affordable Care Act (also referred to as Obamacare) as an excuse for cutting workers’ hours. UPS, the Hamilton (NJ) School District and the city of Long Beach, Calif. have all attributed employee cutbacks to the health care reform that is due to take effect next year.

But count on Starbucks CEO Howard Schultz to buck the trend.

Schultz, who has often been referred to as a bit of a maverick, announced on Monday that he had no intention of cutting employees’ benefits or hours as a result of the ACA.

“Starbucks will continue maintaining benefits for partners and won’t use the new law as an excuse to cut benefits or lower benefits for its workers,” Schultz told Reuters in a phone interview.

The ACA will require employers of 50 or more employees to provide health care for those working 30 hours or more a week. Employers that don’t cover their employees can be subject to fines – an issue that some employers feel shouldn’t be enforced.

Schultz pointed out however, that the Affordable Care Act will have little effect on Starbucks, which is already providing health care benefits to part-time employees that work 20 hours or more a week.

Starbucks_Affordable_Care_Act_Mission_DistThe company, which reported annual earnings of $13.3 billion in 2012, reportedly spends more on health care than it does on coffee, a priority that Schultz has strongly supported in the past.

In fact, when a Starbucks shareholder recently urged Schultz to drop insurance for same-sex partners, he reminded the investor that he was free to sell his stocks if he didn’t agree with Starbucks’ employment policies.

But in the interest of accuracy, while there have been some companies that have cut employee hours in fear of having to pay for health care, a study by the Center for Economic Policy Research (CEPR) refutes that trend.

A study conducted last month found that the numbers didn’t match the hype. Only about 10,000 businesses would actually be affected by the health care requirement, and only about .6 percent of the work force actually worked between 26 and 29 hours in the last year – pointing to the fact that the number of part-time workers since 2012 has remained essentially the same. Therefore, the analysis concluded, while it may appear that there have been a lot of companies reporting cutbacks due to approaching Affordable Care Act enrollment deadlines, there has actually been little change.

“Since most firms in this category already provide coverage voluntarily, it is difficult to believe that requiring the remaining firms to provide coverage or pay a penalty would create such an onerous burden,” the CEPR concluded in a recent statement.

Photo of  Starbucks logo courtesy of marcopako

Photo of Starbucks store in Mission District courtesy of Amit Patel


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  • Tracy Puett

    At the risk of sounding overly simplistic, this is just the kind of spine we need in a CEO! It is time that shared stakeholder value (not just shareholder value) take the lead. If you don’t like what a company (whose stock you own) is doing in the name of social, environmental and fiscal sustainability, then sell your share!

    “In fact, when a Starbucks shareholder recently urged Schultz to drop
    insurance for same-sex partners, he reminded the investor that he was
    free to sell his stocks if he didn’t agree with Starbucks’ employment policies.”

    Kudos to Schultz.

  • Grant Horton

    That is good news, that Starbucks will be sticking with their business model of putting the employee first in this instance.

    Even if this is the case, where less businesses than expected are dropping health coverage, I wonder if we might still see a large leap away from employer plans for other reasons. If we look at the way they are calculating this it seems MANY people will be eligible for tax subsidies on the plans.
    See more information on being eligible for tax credits:
    http://texas.armorhealth.com/733/

    This makes me think that quite a few people might leave employer coverage if it is a bit on the pricier side now, especially for their dependents.

    • J_N_Lee

      Hi Grant. Yes, I agree: It will be interesting to see what the result is of ACA, as things shake out next year (and the year following). It’s good to see when CEOs are willing to stand up for what they believe in face of (some) opposition.

      Thanks for writing!

  • blakec

    When you have $13 billion dollars of annual profits to play with Obamacare is not a problem, but the vast majority of small businesses don’t have that luxury…… Hats off to Mr. Schultz though – he is a compassionate enterpreneur and thought leader – and his always positive employees reflect the pay-off.